In a decisive move to address a $2 billion budget shortfall, Indiana lawmakers have enacted a significant increase in tobacco taxes, marking the state’s most substantial hike in recent history.
Effective July 1, 2025, the cigarette tax will rise by $2 per pack, with proportional increases on other tobacco products. This measure will generate approximately $800 million over the biennium, primarily allocated to offset Medicaid costs.
The tax hike is part of a broader $46 billion biennial budget, including spending cuts in public health and higher education. Despite these cuts, the state preserved a planned 2% annual increase in K-12 education funding. Gov. Mike Braun attributed the budget shortfall to federal policies, while analysts pointed to slow job and wage growth, stock market declines, and broader federal economic policies as contributing factors.
Public health advocates have long championed higher tobacco taxes as a means to reduce smoking rates. Research indicates that significant tax increases can lead to substantial declines in smoking, particularly among youth. For instance, a $2 per pack increase is estimated to prevent approximately 45,100 Indiana smokers from continuing the habit and deter 17,800 young people from ever starting.
The new legislation also includes regulatory measures aimed at curbing tobacco use. Senate Bill 149, signed into law on March 13, 2024, prohibits retail establishments from holding more than one active tobacco sales certificate per location and imposes restrictions on the proximity of tobacco and vaping businesses to school properties.
While the tax increase has garnered bipartisan support, some Democrats have criticized the accompanying cuts to public health spending and the lack of transparency in the budget negotiations. They also called for pausing planned income tax reductions, a proposal Republicans rejected.
As Indiana implements these changes, it joins a growing list of others that have increased tobacco taxes to address budgetary challenges and promote public health. Policymakers and public health officials will closely monitor the long-term effects of these measures.
This is an ongoing story and will be updated as new information comes to light.
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This reporting is made possible by a grant from the Indianapolis African-American Quality of Life Initiative, empowering our community with essential health insights. https://iaaqli.org/
Contact Health & Environmental Reporter Hanna Rauworth at 317-762-7854 or follow her on Instagram at @hanna.rauworth.
Hanna Rauworth is the Health & Environmental Reporter for the Indianapolis Recorder Newspaper, where she covers topics at the intersection of public health, environmental issues, and community impact. With a commitment to storytelling that informs and empowers, she strives to highlight the challenges and solutions shaping the well-being of Indianapolis residents.
When they gonna hit alcohol? It’s ALWAYS tobacco.